A lawsuit brought by a small Peruvian farmer who holds Europe’s largest polluter responsible for its historic greenhouse gas emissions is currently making its way through the German judicial system and with it brings a potential paradigm shift in how the industry private faces climate change.
For the first time, if successful, the lawsuit would hold responsible for the damage to this farmer, the property of Saul Luciano Lliuya, the German high-emission company RWE, proportionate to its historical emissions (snow and ice melting from a nearby mountaintop threaten to overflow the lake in his small town). He may also have to pay for the required adaptation response, such as covering the cost of a much larger dam and / or pumping system in the glacial lake.
It is not just Lliuya and her neighbors: around the world, those facing disproportionate amounts of climate change impacts are in the low-income and developing countries of the global South that are historically the least responsible for the emissions that cause these. climate changes. But they don’t have the resources to fund adaptation projects that will help them survive these impacts. Indeed, controversially, the long-promised funding from the Global North has never materialized.
As the courts grapple with legal issues of responsibility for climate change, we need another force to step in and help with these issues: global capital markets. As companies turn to markets to manage renewable energy credits and carbon sequestration credits, they are ignoring urgent climate adaptation funding, which they have contributed to the need.
We need a new system that gives companies the opportunity to privately fund climate adaptation measures in order to offset their historic emissions and the damage these emissions have caused. This market-based mechanism would help companies protect themselves from lawsuits like this, as well as voluntarily participate in new corporate environmental social and governance (ESG) efforts.
An adaptation credit market would function in a similar way to carbon markets. An adaptation credit would be equivalent to a carbon credit valued at the social cost of carbon: $ 51 / ton (the latest Biden administration estimate). Companies could purchase credits for various projects; for example, a corn farmer in India, who would have to invest $ 10,000 on a 5-acre farm to reduce its vulnerability to climate impacts by investing in drip irrigation, drought-tolerant seeds, etc., would need around 200 credits. Credits for hundreds of corn growers could be pooled by the local co-op and listed on the adaptation market, in which corporate buyers such as Microsoft, Shell and others can participate. Shell, for example, contributed nearly 32 billion tonnes of carbon dioxide equivalent emissions between 1750 and 2018: it could purchase up to 32 million adaptation credits globally, helping to finance a myriad of projects. actual may vary depending on the number of carbon offsets already purchased from Shell). This would unlock up to $ 1.6 billion in adaptation funding from Shell alone for adaptation in developing economies.
A climate adaptation credit market would be a tangible way for companies to make amends for historic emissions in the communities they hit hardest, even if those are located around the world from headquarters. The Google of the World Could Provide Drought-Resistant Seed Funding for Drought-Affected Small Farmers in the Horn of Africa; Microsoft’s of the world could fund coastal restoration measures in Pacific island nations facing rising sea levels.
The United Nations estimates that adaptation costs in developing countries are five to 10 times higher than current public funding streams for adaptation, and the adaptation funding gap is widening, an opportunity for the sector. deprived of intensifying and closing that gap. Many high-income countries are among the largest historical emitters and also need to increase funding for low-income companies, but so are multinationals. They should address this moment with a new leadership on the global stage for climate action.
Agriculture and forestry projects (such as mangrove restoration) would be one of the lowest fruits with by-products of reducing emissions. Benefits could be monitored and tracked using satellite imagery in the form of forest yield and / or growth improvements. This system could also finance adaptation credits for the built environment and cities. At the city level, municipalities and utilities could issue such credits with loans linked to the completion of the projects.
Secondary benefits of this type of system include the acceleration of new climate resistant industries, such as small seed companies that supply climate resistant seeds and weather resistant materials companies. New climate jobs for residents in these communities unlock much needed clean economies around the world. According to a recent report from the Global Commission on Adaptation, a $ 1 investment in adaptation leads to $ 4 in economic benefits within this decade.
It is true that, similar to the early days of the carbon offsetting market, this climate adaptation market may initially face some challenges that quantify progress and verification of adaptation. But tackling climate change requires both carbon offsets for mitigation and adaptation credits, which is an urgent and underfunded need that must be included in any adequate climate change strategy.
Carbon offsets simply don’t go far enough to offset the ongoing impacts of climate change that historic emissions have already caused and continue to cause. Creating an adaptation credit market would help build climate resilience around the world. Starting with low-lying fruits such as agriculture and flood protection infrastructure would pave the way for other interventions.
Above all, it will unite the North-South for an issue that is no longer a long-term issue. We are in the midst of the worst food crisis since World War II, accelerated by climate change. We need global efforts on the same scale to ensure just and resilient adaptation and recovery because by the time you finished this, nearly 500 more people would have become food insecure. We urgently need to accelerate climate solutions, especially in the space of adaptation. This new system is exactly the kind of bold action the world needs.
Himanshu Gupta is the co-founder and CEO of ClimateAi, a climate resilience platform for food, water and energy security for supply chains.